Africa’s acute problems with the EPAs
Ambassador Nathan Irumba, executive director of SEATINI, said that the greatest challenge facing Africa at this moment is the negotiations of Economic Partnership Agreements (EPAs) with the European Union (EU). EPA negotiations have been going on since 2002.
Ambassador Irumba highlighted the interface among EPAs, the multilateral trading system, and regional integration. He explained that the relation of the African, Caribbean, and Pacific (ACP) countries with the EU was governed by the Lome and Cotonou conventions, whereby the ACP countries enjoyed non-reciprocal trade preferences. The relationship was based on three pillars: dialogue, development and finance, and trade. The Cotonou Agreement was judged to be incompatible with the WTO rules. At the Doha Ministerial Conference, the EU and ACP countries were granted a waiver with a view to making the agreement WTO compatible. The negotiations on that track started in 2002.
Ambassador Irumba explained that the objectives of the partnership between the EU and ACP countries include ensuring sustainable development, smooth integration in the global economy, and eradication of poverty. Principles enshrined in the partnership are sustainable development, reciprocity, and special and differential treatment (SDT). As the negotiations emerged, tension was revealed among these principles, specifically the principles of reciprocity and SDT, Ambassador Irumba noted.
In terms of reciprocity, which is one of the necessities of Article XXIV of the General Agreement on Tariffs and Trade (1947) that addresses ‘Territorial Application – Frontier Traffic – Customs Unions and Free Trade Areas’, the question arises on what constitutes ‘substantially all trade’ on which duties and other restrictive regulations of commerce shall be eliminated for a free trade area to be considered compatible with Article XXIV.
Ambassador Irumba said that the EU Commission has taken advantage of the negotiations and Article XXIV of the GATT to pursue the ‘Global Europe’ agenda, whereas one would have expected the negotiations to be confined to minimum provisions that conform to the principles of the WTO. The approach under the ‘Global Europe’ agenda extends beyond the WTO requirements.
The EU Commission defined ‘substantially all trade’ as requiring liberalization up to 80% of trade by ACP countries, while the EU offered liberalization of 100% in return. That is considered quite deep liberalization, Ambassador Irumba underlined, and wondered whether it will be in the interest of African countries to undertake such liberalization.
It was noted by Ambassador Irumba that under the WTO negotiations on non-agricultural market access (NAMA), least developed countries (LDCs) and most African countries are not expected to undertake reductions under the proposed formula.
Another aspect highlighted by Ambassador Irumba is the whole question on the EU’s demand for prohibition or limitations on export taxes. The EU is worried about the appetite of China and India in regard to Africa’s raw materials, the Ambassador noted. African countries insist that they need export taxes. Yet, on the question of agricultural subsidies, the EU insists that this issue should be discussed within the WTO and should not be discussed within EPAs.
Another contentious aspect highlighted by Ambassador Irumba is the most-favored nation (MFN) principle, whereby he explained that the EU insists that any preferential treatment offered by African countries to emerging developing countries, such as India or Brazil, should be offered to the EU as well. Yet, under the WTO, trade among developing countries was supposed to be covered by the Enabling Clause (1979), he highlighted.
At all these levels, there is an attempt to go beyond what the African countries offered in the WTO and what the WTO requires.
Ambassador Irumba also discussed the question of the ‘rendezvous clause’, whereby the EU requires partner countries to commit to discussions on issues like intellectual property and trade facilitation. So far, there are no substantive negotiations on these areas, but the EU insists on a timetable in this regard, Irumba explained.
In regard to duty free quota free (DfQf) market access, Ambassador Irumba noted that this preference is offered under the Cotonou agreement. As an interim measure, the EU in 2002 established a regulation that allows African countries to continue accessing DfQf as negotiations evolve. Yet, the EU with full support of the European Parliament had lately announced that by the first of October 2014 any country that has not signed and ratified the EPA will be denied access and benefit from DfQf, Ambassador Irumba underlined.
Some countries like Kenya are pressured to sign. Yet, SEATINI is advising governments to consider the anatomy of their exports to the EU before taking a decision in regard to EPAs. Most exports by African countries to the EU are primary commodities that are covered by the Generalized System of Preferences (GSP), since the EU needs them. The only two products that will be affected are flowers and fish, Ambassador Irumba explained. In the case of fish exports, Mr. Irumba argued for prohibition of fish exports due to the threat of depletion.
Furthermore, Ambassador Irumba tackled the question of how the EPA negotiations affect regional integration. He noted that although African countries are supposed to gradually phase in tariff reductions, they would likely end up narrowing down the regional markets for African products, which would end up having to compete with EU products. Another issue highlighted by Ambassador Irumba is accumulation. African countries want to be able to cumulate with South Africa, as part of the regional integration among the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), and the Southern African Development Community (SADEC), yet the EU has been opposing this process.
Ambassador Irumba called for protecting the space for Africa’s regional integration. He cautioned that the United States (US) is monitoring the EPA negotiations and has gotten interested in seeking a trade and investment agreement with East African countries. Whatever African countries offer to the EU would be demanded by the US, Ambassador Irumba noted. He stressed that the next few months are critical as far as African countries are concerned with EPA negotiations. He called for concluding lessons from the experience of the CARIFORUM countries that have signed EPAs yet did not achieve much gains so far from the agreements.